Competition in the restaurant business is fiercer than almost any other industry. Restaurants are now facing competition on an entirely new front. They must not only compete with other restaurants, but also with food delivery startups and e-commerce companies that are usually associated with the restaurant industry.

Earlier this week, KFC and Taco Bell both announced plans to expand food delivery options[1]. Taco Bell intends to offer delivery services from thousands of its restaurants from coast to coast.

Amazon has taken a similar position. They are allowing customers to place orders for food online. A variety of smaller startups have followed suit.

Restaurants Respond to Threats from Food Delivery Startups

A number of restaurants have raise concerns about the growing competition food delivery services have created. However, many experts feel that these concerns are blown out of proportion. Abraham Zaiderman[2] believes that restaurants will outperform new competitors by offering the same exceptional service that has earned them their existing market share. Any negative impact on revenue will likely be temporary and modest at best.

The reality is that all customers have different priorities. While some customers will appreciate the convenience that food delivery services provide, others prioritize the ambience of their favorite restaurants.

Restaurants have faced competition from other businesses in recent years as well, but the impact on their sales has been negligible. They were concerned that prepared meals from grocery stores would hurt their bottom line, but that has not been the case. The market for prepared foods at grocery stores and convenience stores has grown by slightly over 1% over the past year[3], while the food service industry has been growing over 4% a year.

The same trend is likely to hold with new food delivery startups. Since many restaurants already offer delivery options, the new startups aren’t necessarily worthy adversaries. Technological innovation may give them a slight advantage, but it won’t make up for subpar service and poor food quality.

Restaurants Must Still Respond to the Threat of New Competition

Nevertheless, restaurant executives are carefully monitoring the food delivery startups they may be competing with soon, so they can make sure that they will maintain their competitive edge over them. While the market for prepared food in grocery stores may not be very high, that doesn’t mean that food delivery startups can’t compete. They will need to demonstrate that they have quality food and reliable customer service. That may prove to be a daunting obstacle for some startups, but others will be up for the challenge.

The ultimate question will be how well these companies will be able to differentiate themselves. Amazon now and Uber are focusing mostly on developing a technological edge. This is the advantage they gained over competitors in their original lines of business. However, some critics have recently pointed out that this won’t help them in the long run. They said that the food that Amazon now sells is available at whole foods as well. If customers grow wary of the food choices available to them, they will likely turn to other options. As long as restaurants offer higher quality food, attract positive online reviews[4] from customers and offer more personable service, they will continue to thrive.